Pareto improvement through unilateral matching of public good contributions: The role of commitment

- Unilateral voluntary matching of public good contributions mitigates the underprovision problem.
- Matching in the standard model benefits the donor and harms the recipient.
- We provide a novel graphical explanation of this transfer paradox.
- The transfer paradox can be avoided through a commitment device for the donor.

When providing public goods through voluntary contributions, a donor may introduce unilateral matching in order to reduce underprovision of the public good and thus inefficiency. By itself, however, matching benefits the donor but harms the recipient. We apply Cornes and Hartley's aggregative game approach to provide a novel graphical explanation of this transfer paradox, and also show how it may be avoided by introducing a commitment device.